POLITICS

The Waugh Zone July 6 2015

06/07/2015 08:17 BST | Updated 06/07/2015 08:59 BST

The five things you need to know on Monday July 6, 2015...

varoufakis

1) GRECO-GERMAN WRESTLING

They tried to make ‘em go to deficit rehab and they said ‘No, No, No’. The Greeks have voted decisively against their creditors’ medicine of continued austerity and everyone’s asking what’s next. After the shock resignation of finance minister Yanis Varoufakis this morning (via Twitter and a blog, natch), attention now turns to both the markets and the politicians.

Highly-paid ‘City analysts’, who claimed just a few days ago that we were heading for a ‘Yes’ vote, have proved themselves even more clueless than Britain’s pollsters. And in the topsy-turvy world of finance, it was the ‘shock’ of the vote last night that makes it even more likely that the Greek banks will get a mighty kicking on the markets. The European Central Bank (based in Frankfurt don’t forget) has to make a big call about providing emergency funds.

Have the eurozone’s politicians called it as badly as the markets? The Germans have been piling on the pressure, led by finance minister Wolfgang Schauble (ex US Treasury Sec Tim Geithner’s memoirs point out Schauble pushed for Grexit in a meeting they held in 2012, a stance he described as ‘frightening’). Last night the CSU, the sister party to the ruling CDU tweeted: “Goodnight Greece! You’re now on a difficult path”. Even the German left have been vitriolic, with the SPD’s Martin Schulz, the European Parliament president, warning Athens faced a collapse of its health system, power stations and transport unless it got rid of Syriza. SPD minister Sigmar Gabriel last night said Greece had ‘torn down the the last bridges on which Greece and Europe could have moved towards a compromise".

The resignation of Varoufakis could help rebuild those bridges, not least given he called his critics ‘terrorists’. In his early morning blog, he wrote: “I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement.” This will simultaneously fuel Greek resentment, while increasing the chances of a deal.

And the one German who matters most is of course Angela Merkel. In what looks like one last roll of the dice, Merkel meets Francois Hollande today, ahead of an emergency eurozone ministers meeting tomorrow. If Tsipras gets some kind of debt restructuring in return for signing up to bits of austerity, both sides will be able to claim victory. And that’s what normal negotiation normally aims for. Not that there’s anything normal about this.

What about the impact on Britain? David Cameron is meeting Mark Carney and George Osborne this morning for emergency talks on the Greek fallout economically.

But the political repercussions are just as interesting. A plucky nation of islands on the edge of Europe, holding a referendum voting ‘No’ to defy the establishment orthodoxy in Brussels...that’s what some siren voices on the backbenches will now be saying. Labour politicians have long argued that ‘Britain is not Greece’, but with little success in the face of Osborne’s warnings about the dangers of not tackling deficits. But will he and Cameron be hoist by their own petard in 2017?

Paul Krugman in the New York Times today writes: “There’s actually a pretty good case for Grexit now — and in any case, democracy matters more than any currency arrangement.” With an eye on our own referendum to come, that’s a sentiment many Tories will agree with.

2) GEORGE SINGS THE BLUES

It’s no exaggeration to say that George Osborne owes his position in part to the Greek drama. Way back in 2010 in the days after the election, Mervyn King and Gus O’Donnell joined Osborne in citing Greece as the reason for a swift decision on the formation of a UK government, fearing similar UK market turbulence. The Lib Dems agreed and the Coalition was born.

The Chancellor may be free of the Lib Dem shackles but he’s as keen as ever on warning of the dangers of Greek-style deficit denial. And this week’s Budget, blue in tooth and claw, sees him pressing home his advantage of a stunning election victory over Labour. Kicking a man when he’s down is not the done thing in sport, but in politics it can be a way of life.

Osborne will be pressing hard on the bruise that is Labour’s reputation as ‘the Welfare Party’, a reputation he knows resonates with UKIP voters as much as Tories. That’s why we’ll get the lower benefit cap and higher earners having to pay market rents for council flats. Yet as eye-catching as they are, in both cases the amount saved is small change compared to the £12bn welfare savings needed.

That’s why the real focus should be on the big ticket items of housing benefit and tax credits, which will save billions not tens of millions. On Marr, the Chancellor pointed out tax credits “now cost £30bn... that’s a huge amount of money, that’s three times the Home Office budget”.

What was also telling from Marr was Osborne’s refusal to signal a higher minimum wage to end the tax credits ‘merry go round’. His solution was instead to give tax cuts. But in the Budget ‘scorecard’ this Wednesday, will an average striver see the loss of their tax credits more than compensated by tax cuts? Or is he just hoping wage rises later in the Parliament will plug the gap?

Osborne ruled out an immediate cut in the 45p tax rate (and Lord Lamont said there was no rush). But Boris has used his Telegraph column to make a typically Boris-like pitch to both left and right in his party: calling the 45p rate to be slashed to 40p, while urging business to pay the living wage. Note Boris didn’t call for the minimum wage to go up, and prefers entreaty to legislation on low wages: for now at least.

3) BBC OFFLINE

Osborne’s freshest remarks on Marr focused on the BBC and his line that the ‘imperial’ BBC website could be a source of savings. Some Tories argue that the BBC should stick to broadcasting and not have a website at all (other than iPlayer). But if it had no presence on line, you can imagine some arguing that it was out of touch with modern Britain. Yet again, Auntie will think it can’t win either way.

But Osborne reflects the worries of many newspaper (and online) rivals to the BBC that it is crowding out others from the market. He pointed out when he cut £500m from the World Service, there were protest from those who said he was going to close BBC2 or Radio 4. ‘They always seem to pick the juiciest fruits on the tree..I’m absolutely sure they can make a contribution’. Some in Radio 5 may wonder if they’re next (given they weren’t namechecked) but surely Osborne won’t want to axe Radio Bloke?

The Sunday Times had a nice scoop yesterday that the Chancellor was also thinking of forcing the Beeb to foot the £650m bill on free TV licences. In return the BBC could be allowed to charge for iPlayer use (though how that will work in practice is not clear at all).

Ex BBC chairman (and Tory) Christopher Bland attacked this as ‘The worst kind of dodgy Whitehall accounting..it draws the BBC closer to being an arm of government.’ Damian Green pointed out on Radio 4‘s Westminster Hour that the DCMS Select Committee had previously called for a ‘household levy’ to replace the licence fee. And who was the committee’s chairman back then? Yep, current Culture Secretary John Whittingdale.

BECAUSE YOU’VE READ THIS FAR...

Watch Sajid Javid talk condoms. And see him prove just how natural he can be in front of an audience. No wonder that Tory leadership talk is increasing.

4) STORMIN’ CORBYN

The decision of Unite the Union’s executive to endorse Jeremy Corbyn yesterday gave his campaign a big fillip. Yet the second preference recommendation for Andy Burnham is a mixed blessing. It suggests enough distance for him to claim he’s not in the unions’ pockets, but enough friendliness for Cooper and Kendall to claim he’s not exactly free of Red Len’s reaches.

Today, Yvette Cooper wins the endorsement of Keith Vaz. In typically Vaz-like form, he declares that she is "extraordinary at the despatch box & smashing on the dancefloor. There is a serious point here though and that’s how much Cooper has been winning endorsements among what could be a key selectorate: the BAME community. Virendra Sharma, Rupa Huq, Thangam Debbonaire, Seema Malhotra, Khalid Mahmood, Shabana Mahmood and Naz Shah are all backing her.

Yesterday, Liz Kendall won the backing of John Reid, who suggested Labour faced a moment in history similar to that in the wake of Michael Foot’s defeat. “Do we really have to relearn the lessons of the 1970s and the 1980s? At Labour’s conference in 1983, Neil Kinnock had to tell delegates that “We have to win. We must not permit any purpose to be superior for the Labour movement to that purpose”.

5) BEYOND THE BOMBINGS

We at HuffPost UK are running a special series of reports, interviews and blogs to mark the 10th anniversary of the 7/7 bombings. We have an extraordinary interview with Gill Hicks, who lost her legs in the attack on a Tube train near Russell Square. It’s an incredibly moving read.

Among our bloggers is Tessa Jowell, who recalls how the UK united in the face of the threat. Watch for more great blogs and reportage today and tomorrow.

ONES TO WATCH

Theresa May has Home Office Questions today at 2.30pm in the Commons (though we could perhaps get another statement or Urgent Question on Greece). May could well be quizzed on just where her anti-radicalisation plans for universities are now heading.

It’s the final day of committee stage of the Scotland Bill.

Today, in Westminster Abbey there is a memorial service for the victims of the Srebrenica massacre, when thousands of Muslim men and boys were killed by Bosnian Serb forces 20 years ago. Around 100 events are being organised across the UK over coming days in memory of the genocide in 1995. will be followed by a reception hosted by David Cameron at 10 Downing Street. There will also be a formal reception in the Houses of Parliament hosted by Speaker of the House John Bercow.

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